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29476667-Buyback-of-Shares

29476667-Buyback-of-Shares

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Published by krgit

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Published by: krgit on Apr 09, 2011
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10/02/2011

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71

The buy back of shares had been done by the company in order to create long term
Shareholders value, improve return on Net Worth and enhance the Earning per share of
the company. The company seems to have surplus reserves with no current opportunities
and it has also mentioned that if in the future there is any growth opportunity they have
enough reserves to fund its growth and because of the availability of such reserves the
company has bought back its shares rather than keeping the reserves idle. It can be seen
that as the company does not have any long term debt, which would mean that there
would not be any major payments in the future, therefore this is one of the reason why the
company has bought back its shares.

Glaxo SmithKLine Consumer HealthCare Limited is an FMCG company and it has been
observed that this industry do not have any major expansion plan and because they have
surplus funds available with them, they tend to utilize these funds by buying back its
shares. Few buy back of FMCG companies are Britania, Godrej, Glaxo, and now HUL is
also coming up with a buy back program. This indicates that the major FMCG companies
have huge reserves with no current expansion plan and as such they tend to buy back its
shares.

The Buy Back:

72

The company had a successful buy back offer. The company received offers for buy back
of 78, 22,873 equity shares 135% more than the shares to be bought back by the
company. The buy back Committee followed the method of proportional acceptance of
shares and only 33, 25,083 shares were bought back. Post buy back the shares were
extinguished and consequently the share capital of the company reduced.

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